Commonwealth Bank of Australia, the nation's second-biggest lender by assets, said it was in talks to buy ABN AMRO's Australia and New Zealand operations, as it looks to strengthen its institutional banking and markets business.
The news came after National Australia Bank on Tuesday dropped out of the race to buy ABN AMRO Australia Holdings, a unit of Dutch bank ABN AMRO, which analysts value at about A$800 million (US$777 million).
The unit is being sold by a consortium led by Royal Bank of Scotland, which bought ABN last year.
Commonwealth shares were up over 2 percent in the Sydney morning session, following Wednesday's announcement, which analysts said came as a surprise.
"The thing I find surprising is that the various business units of ABN AMRO seem to be a better match for NAB than for Commonwealth," head of investment research at Constellation Capital management, Peter Vann said.
"It is interesting if Commonwealth would be in a better position to get more synergies than NAB would have ... to offer a fair price one needs to extract synergies," Vann said, adding that the decision by Commonwealth to enter into talks was a curious, rather than a negative or a positive surprise.
CBA said its proposal was incomplete and subject to further negotiations. A final agreement would require board, competition and regulatory approval.
The bank has entered into a period of exclusivity around negotiations and due diligence with Royal Bank of Scotland.
Last year, a consortium comprising Royal Bank of Scotland, Spain's Santander and Belgian-Dutch Fortis bought ABN AMRO for about $99.4 billion. The consortium has been looking to sell some assets to strengthen stretched balance sheets.
Commonwealth Bank and Japan's Nomura Holdings were tipped as potential bidders for the ABN's Australian and New Zealand business after NAB withdrew.